425 1st Street #1802
Once again, the attempted flip of One Rincon Hill (425 1st Street) #1802 first hit the market seeking $1,399,000. Withdrawn and then leased (asking $5,250/mo), #1802 returned to the market in August with a list price of $1,299,000. Having been reduced five times since, the two bedroom condo is now asking $999,900 ($764 per square foot).
As plugged-in people know, 425 1st Street #1802 was originally offered by the sales office for $980,000 (not including any upgrades) when it first opened its doors well over two years ago. And the 1,309 square foot “02” two-bedrooms with Bay Bridge views are considered to be some of the most desirable units in the building.
At the same time, the attempted flip of the first reported resale (425 1st Street #2202) remains optimistically priced at $1,359,000; the list price for 425 1st Street #2103 has been reduced to $1,075,000 (asking $1,229,000 in March); and the listing for 425 1st Street #2307 was withdrawn from the MLS after 200+ days on the market (having been reduced down to $749,998, originally asking $849,000).
∙ Listing: 425 1st Street #1802 (2/2) – $999,900 [MLS]
∙ Listing: 425 1st Street #2202 (2/2) – $1,359,000 [MLS]
∙ Listing: 425 1st Street #2103 (2/2) – $1,075,000 [MLS]
The First “Official” Resale At One Rincon Hill Closes Escrow: #2202 [SocketSite]
Same Same But Different: 425 1st Street #2103 For Sale (Or Rent) [SocketSite]
Four Floors Lower, But Asking One Hundred And Fifty Thousand Less [SocketSite]
First Impressions: One Rincon Hill Sales Center [SocketSite]
Trying To Establish The True Secondary Resale Market: One Rincon Hill [SocketSite]

97 thoughts on “One Rincon Hill (425 First Street): Secondary Market Stumbles”
  1. You would think at 697 feet above sea level these units would never be underwater.
    What happen here? Bad news for any and all in that building for sure. Yikes.

  2. No surprises there. The buyers who are shopping today are people who actually plan to live in the place, whereas many of the past 2 year’s buyers are prospective flippers trying to get into the gravy train too late.
    Without the irrational flippers, buyers are including fundamentals into their choices. Like what would the same place rent for in case they need to temporarily move out? Can they withstand a job loss or another financial hit? And if they do, how will the resale market be? How will the day-to-day life be in a neighborhood in transition?
    ORH has a lot going on for it. But it is still priced too high in regards to many people’s fundamentals.

  3. Oh, a big no-no:
    HOA fees are just way too high. $709 is crazy. The HOA flippers should renegotiate lower fees if they want to attract buyers (and of course lower services). If prices go down into the 600K-700Ks overall, the buying crowd will not give a rat’s buttocks about valet parking or high-end security. This is a middle class building being sold as upper class and the price free-fall just proves this point.
    Wake me up when the HOA fees are in the 200-300s.
    I don’t want to pay for the Joneses’ dream of Grandeur.

  4. The base price plus inflation would be $1,052,790. Discount 20% and the price goes down to $842,232. That 20% off base calculation is still a rosy scenario. Under $650/sqft seems a likely future, though it should take a while to get all the way there.

  5. Boy, I have to finally swallow my pride and agree with ex-SFer:
    avoid cooperative living arrangements…all these units are competing with eachother.

  6. San Fronzi lowering prices is one thing but to get HOA down that low is just asking for trouble. When maintenance is needed, a building is not kept up because there is not enough money to fund it, or something unexpected happens it forces large fees on those living in the building or the maintenance typically gets deferred and problems stack up. Similar situation to budgeting for a home, if you dont plan and set aside savings when things like a bad economy strike you can wind up in a big mess.

  7. Agreed, Mole Man. By my admittedly rough calculations, a lot of the new construction in Soma starts to make buying sense at $600 to $650 psf. That’s compared to current rents…which are now starting to fall. Tough to tell where things settle.
    And the HOAs are indeed egregious in some of these buildings. You can rent an in-law unit in the outer Sunset for just the HOAs on some of these units.
    Funny how quickly things change. Things that were status quo just a year or so ago (i.e. $750 HOAs, $1,000 per square foot, etc.) now seem absurd in the current market.

  8. Just take a look at any typical budget for a multi unit building and you will see it cost much much more to maintain it than one would think.

  9. I suppose 709 doesn’t include special assessments for extra maintenance. I am pretty sure they can cut a few unnecessary items to bring it to reasonable levels without jeopardizing the building’s safety, soundness and appearance.
    Plus this is a very new building. There shouldn’t be much to do in terms of remodeling/paint in the next 10 years. You have to have a few necessities like elevator maintenance/inspections, cleaning and other basic things. It would be interesting to see some real numbers if someone has them.

  10. HOA’s for new construction are set by the DRE based on the building’s budget, not by the developer.
    High rises with lots of amenities are expensive to operate and maintain and the HOA’s at ORH are not going to drop. In fact, I wouldn’t doubt they increase if the second tower doesn’t get built soon.

  11. gowiththeflow,
    I agree the cost of ownership is way more than just a mortgage. With 9 rentals I had back 3 years ago, 40% of the rent received was going into scheduled and unscheduled maintenance.
    Which is why you want to keep it lean on all non-necessary things. If buyers are already mortgaged to the gills PLUS have high regular HOAs, they are more likely to balk at special assessments.
    I was president of an HOA for 3 years. There were as many voices and opinions as there are homeowners but you often manage to find good common ground. But I learned you have to have a lean HOA cost structure to get everyone on board for necessary repairs. If you fight for every penny and show it, you’ll have no problem explaining why you must request special assessments.

  12. Free Fallin’, no doubt. There really isn’t even a debate at this point. We can still speculate as to the steepness of the fall and what this means for the second Infinity tower, but this building is clearly in trouble.
    [Removed by Editor (sentences that start “Sorry to go off topic…” are better received when submitted as a tip)]

  13. San Fronzi with all due respect I am surprised to hear you estimate 200-300 as fair value HOA for a building of this type espeically having been an HOA president. Yes overfunding HOA may cause one to balk at special assesments however underfunding will also because when problems do arise that require special assesment they are usually large and cost much more than people think. It is not always easy for people to come up with large sums say 30k + per person when disaster strikes. A few years back this happened to a building across the street from me. Best course of action is to review the HOA Budget prior to buying which I hope most do but guessing they do not. As with everything there are a range of opinions on how things should be dealt with. Cars for instance, some want to maintain and keep the thing in top condition for years while others choose to deal with larger problems when they happen and put off regularly scheduled maintenance. It is personal opinion.

  14. Clearly people proposing radical lowering of the HOAs have zero experience with these types of buildings. There’s NO WAY you could get them much lower, frankly.
    There’s reserves that have to be built up, fire inspections, elevator maintenance, generators, insurance, etc, etc, etc.
    In all the HOAs Ive been involved with, there’s not really much fat to cut (and everyone tries to, believe me).

  15. SF Schtuff posted condo sales number for November (again, kudos to him for his efforts to further transparency). They explain pretty starkly what is going on here. Click on the link for all districts, but here are the D9 condo numbers:
    11/07: 67 sales, $727,500 median
    11/08: 26 sales, $631,244 median
    Is there any explanation other than that the SF condo market has crashed?

  16. I dunno, I like the bridge as must as the next guy, but I prefer looking at the bridge from the side, and not directly down on it with the ability to read the license plates of the cars. I think that view would constantly remind me I live directly adjacent to the freeway.

  17. 200-300 is pretty aggressive but it would be interesting to see the costs for all amenities. Swimming pools are a really great feature but how much do they cost? Valet parking is a ridiculous expense, imho. How much does a gym cost and wouldn’t it be more cost-efficient to rent out the space to a membership-funded gym club?
    I agree costs will probably go up. They always do, this is the nature of the beast…
    And the car analogy is a pretty good one. A brand new car only needs gas and a semi-attentive eye for the first few years. For instance most of the time new cars are so well built today that you could skip the first 5-10 oil changes without doing much damage to the engine (please do not follow that advice). I am not so sure about how long your car will last though…
    But you can easily skip the detailing that doesn’t really serve any useful purpose. And it costs as much as 3-4 oil changes easy.

  18. Does anyone know what comparable units in this building are actually renting for? (As opposed to wish prices from craigslist.)

  19. Speaking of craigslist for a moment… WHAT is up with the person who keeps posting the 2-bedroom at various Rincon Hill/South Beach buildings for between $1650 and $1950? I keep getting calls from it from people who look up info on the buildings (like the Brannan) and want to know if it’s a scam. The ad keeps getting removed, but then they just post it again.
    Please, if anyone sees a rental ad for a two-bedroom in South Beach under $2,000 a month, flag it for CL to remove — it’s a scam. They’re just trying to get your deposit money!

  20. I agree with you relative to skipping the detailing and saving cost there. Catch is pool, valet, etc. are offered with the building, and are in fact why some would buy in a building like ORH, Infinity etc. If one does not want to pay for extra ammenities they should not be looking at those types of buildings; there are plenty of buildings out there with the lower HOA and fewer services and ammenities.
    As for reaching 200-300 with a building like ORH sorry I just don’t see it being possible.
    Car analogy fine, yes new cars typically with typically being the key word – require less maintenance; we agree there. Problem is if you don’t have a warranty, or savings in the bank and your timing belt goes out, engine cracks due to lack of oil etc. etc. you will be forking over more money than you have set aside or expect to pay with in that time frame.
    All I am saying is it is a matter of opin some people like to plan, know they have a cushion where as others are more fly by the seat of. I respect that you are the later, I am not.

  21. Maybe the Rincon Hill weather beacon will come in handy now the building is in a deflationary death spiral:
    BLUE – 40% OFF!
    RED – 2 for the price of 1!
    AMBER – A hundred back rubs included!
    GREEN – Free if you pay our high HOAs!

  22. I would never, ever, under any circumstances buy into a highrise building with HOAs in the 200.00 to 300.00 range, no matter how low the price of the unit. It’s a tip-off to deferred maintenance and a heap of very expensive trouble in the future.

  23. for comparison, 140 South Van Ness has no (none) amenities except for a moderate size exercise room, and it charges about $400 for HOA, excluding parking. 199 New Montgomery has nothing but a door person (no exercise room even), and it charges over $400, again no parking. These are just 1 bedrooms.

  24. Salarywomen you are dead on. Unfortunately I know people that learned this the hard way. I would highly suggest that if one desires low HOA, does not plan to be in the building long, etc. prefer to bet it all on black, they at minimum request maint records, and budgets to review before buying. Buying in a building with low HOA may work out for some but if you are in the building when it hits the fan get ready for a bumpy ride.

  25. I can’t help it, I just love watching this ORH trainwreck. Where is Recent ORH purchaser when you need him/her?
    BTW, I’m no expert on SOMA condos, but even with the Tower II overhang, I bet that the Infinity will turn out to be a much better bet going forward than ORH. (They’ll both get crushed as investments IMO, but Infinity will recover faster, 10 years from now….)

  26. @condoshopper
    My 1/1 @ 140 S Van Ness has an HOA of $320 (largest 1/1 in the building) Has a nice sized gym, very well maintained 3rd floor outdoor space, and 2 people onsite 6 days a week keeping up the building. Leased parking is only 100/month. However It does cost a lot more to maintain a 60 story highrise over an 11 story midrise I am sure.

  27. LMRiM – phew glad to hear it. I enjoy reading your posts, easy to see you know your stuff, and I respect your estimates and evaluations. I bought in 2004, sold end 06/ early 07. I bought recently at the Infinity, assuming I would be here long term, need the deduction, and love it. I believe I got a good price on the place and played it as safe as possible by not buying the best unit on the block. We got in at a low int rate on the increased conforming. I watched the market like a hawk and paid no more than any other comp properties were asking at the time, it was the best I could do with out having to wait (did not have the luxury to do so). Do you think if the neighborhood is developed that will help buffer a good portion of the fall once RE is back to normal even if it is 10 years out? Help the Infinity climb faster than other buildings in areas all ready developed? Or do you say Infinity will perform better soley on it being the building it is? Do you think if rates drop to 4.5% and create another false propped up bubble that it would be an opportunity to sell or if one plans to be in the area 10+ years should they stay put?

  28. Trip, thanks for the link to “san francisco schtuff”. Can these numbers be right? They show Nov. 08 median prices for SFH’s to be either higher than ’07 or only less than 10% lower in Districts 1, 2, 3, 4, 5 and 9! Does anyone know where that site gets this “schtuff”? Numbers of SFH sales are significantly down of course (except for districts 2, 3, 4 and district 10 where prices have crashed). Any explanation would be appreciated.

  29. Thank you, jessup for the comic relief! I am still amazed at this silly new lighting/weather system. Did they pass out color wheels to everyone in SF to interpret the changing hues?

  30. ryan, thanks for the correction. i previously thought it was more like 400 hoa and 200 parking, but that’s only from casually perusing the MLS. anyway, it shows that HOA’s can probably not be below this amount, given that this building is relatively low-service already, so the fees at 1 Rincon do not seem out of line.

  31. $320 for an 11 story midrise – and people are wondering if $600-$800 for a building more than 2x+ the size should be 2x+ the cost to maintain and bill HOA fees at? Hmmm? Sorry I may be having an off day but this sounds logical to me.

  32. Elevators in a tall building mean high maintenance fees. You need to have a maintenance contract in place. The complexities of a large building mean you have to have maintenance people who are dedicated to that building or perhaps shared among a very few. All that stuff costs money.
    And recognize that the developer isn’t stupid: HOA fees usually RISE after the first few years because the developer wanted to quote lower than realistic HOA. So he’s already cut out the “new car” lack of maintenance from the fees. If he hadn’t, he’d have to charge lower prices. So he had every incentive to cut to the bone (and probably then some). HOA fees usually rise on new developments for this reason.
    The HOA fees aren’t going down to $200. Instead, it’s the other way around: the high HOA for the market will be a permanent drag on resale prices.
    Finally, it is SOOO transparent what is happening with the first resale (#2202). Purchased by a related party, they are not actually trying to sell that unit, which is why they haven’t lowered the price. Instead, all of the sales team probably repeats, daily, the fact that someone is offering that unit for WAY more than the initial price to entice would be flippers with dollar signs in their eyes who think that if someone is asking it, it must be pretty close to a realistic price. I’m sure they “forget” to mention this unit, on which the buyer is about to lose a substantial sum of money.
    So they got good publicity from the fake sale price and they will keep using it for marketing purposes til the cows come home.

  33. As with every HOA, it is important to review not only the budget vs. amenities but also the budget vs. your CC&Rs and any related operating agreements and/or reciprocal easement agreements. There was also recent legislation passed that requries HOAs to perform studies for the funding of reserves, so these studies should be reviewed as well. You should look to see if amenities are in line with building size/number of units. In general, the greater the number of units, the more amenities can be readily provided and paid for. A small or mid size building with full time security staff is simply going to have much higher HOAs than the same staff as a larger building. Know what you are buying.

  34. I have a great idea…why dont’ we give every homeless person in the Tenderloin a free One Rincon Hill condo?
    The building will finally be full of permanent occupants that way..no?

  35. $320 for an 11 story midrise – and people are wondering if $600-$800 for a building more than 2x+ the size should be 2x+ the cost to maintain and bill HOA fees at? Hmmm? Sorry I may be having an off day but this sounds logical to me.
    I am not really following the logic. Maybe I have a day off too… If a building is twice bigger in theory it should have twice the number of occupants who would spread the costs. And the costs should go down dues to scale issues.
    This is what economies of scale are all about. A house has 4 walls and 1 roof to maintain. A 4-unit building has larger walls and roof, but very often the surface to maintain is not 4 times larger, maybe 2 or 3 times, which causes 15% to 50% lower costs. The larger the building, the more savings per unit.
    And I agree a lot of buyers will still want amenities. No questions. But I think we’re entering a “less is more” period while everyone tries to get rid of unnecessary debt and saves for the future.
    By the way, I am not a deferred maintenance guy, on the contrary. I was just extra careful in my HOA experience when spending other people’s money… Spend wisely, fight to get the most bangs for the bucks. That’s how I built what I have.

  36. @sanfrantim–
    great question. we get the info directly from the MLS. there is the possibility of human error as i literally translate it from the MLS to a spreadsheet (by hand), but i’m confident that those numbers are correct. hold on… let me double check…………
    ok, i just went back to double check to make sure there were not errors and it seems that the data for 2002 and 2007 is accurate, but the data for 2008 is slightly off in a few districts as there has been 1 sale added in a couple of districts since i ran those reports (in this case, on 12/2. perhaps i should wait a week or two to publish this data in the future). i assume that discrepancy comes from the fact that a sale was added to the MLS after i created the report, thus, the data was accurate as of the day of reporting. due to the discrepancy, i noticed that the median price went down by a few thousand (negligible) in some districts, but also went up by a few thousand (negligible) in others. the average DOM changed slightly too.
    i just started the 3 year comparison, but to see a ton of comparisons from the past (just year over year), check this out: http://sanfranciscoschtuff.com/tag/year-over-year/

  37. the Brannan, probably the best building South of Market (certainly where values have held up the most) has HOA’s in the $800 range for a 2 bedroom. For that you get 24 hr. security, 40 hour a week concierge, constant maintenance, a very large and nice swimming pool and gym. It may seem like a lot, but you really need to maintain a building like this to understand the costs.

  38. One Rincon Hill HOA’s are what they are because: building insurance, 2 full time maintaince people, 4 (or more) full time concierge, 5 Valets, 3 people in community management, a year round heated pool, hot tub, BBQs, huge exterior park/common area with a gas fireplace and reflecting pool, gym, conference and community rooms (with internet and cable TV) and a very extravagent lobby. Operating One Rincon Hill is a huge job!
    Prices have fallen everywhere. Be thankful it’s been as slow coming and gentle as it has in SF. Look at The Central Valley, The Inland Empire, San Diego and just about every other major city in the US. 30-50% declines in price are inevitable.
    Even with the declines, it can’t be denied that One Rincon Hill is now a San Francisco landmark, greeting commuters from the Bay Bridge and making a prominant statement on our skyline.
    I hate myself for posting…. The real estate downturn is like a car accident. It’s nothing new, they all look the same and we all gawk at the wreckage.

  39. I agree with getting the most bang for the buck but not cutting corners which is what you would have to do if you got the ORH HOA down to $200-$300. I really don’t think either of us is having an off day we just see things a little different which is quite all right. This is the beauty of having different buildings, different management and different HOA available. I can tell you I personally will never go back to a lower cost HOA building. Paying almost twice the HOA I paid prior to living at the Infinity makes a difference in everything; it is money well spent.

  40. “$320 for an 11 story midrise – and people are wondering if $600-$800 for a building more than 2x+ the size should be 2x+ the cost to maintain and bill HOA fees at? Hmmm? Sorry I may be having an off day but this sounds logical to me. ”
    Isn’t there also 7 tmes the people so that the total homeowner fees are 7x for the ORH vs. 140 s. van ness

  41. “There are a lot of great deals floating around right now if you want to live in South Beach. The buyer is the boss!
    Posted by: Paul Hwang at December 11, 2008 12:47 PM”
    you gotta be kidding. these prices are going down relatively fast now. Why would anyone buy before they see the prices stabilize?

  42. Boy, I have to finally swallow my pride and agree with ex-SFer:
    you’d better be careful, or soon you’ll be my BFF.
    avoid cooperative living arrangements…all these units are competing with eachother
    in the end, all housing competes with one another to some degree. I don’t worry too much about that. although it is clearly harder to differentiate oneself when there are 10 identical units competing with yours.
    What I worry about is buying into a cooperative type living situation and sharing financial responsibility with others.
    ORH owners may be in a pickle right now. I’d guess that the HOA fees were calculated using nearly full capacity of two towers. Instead, there is only one tower and it’s not fully occupied. worse, it is clear that there is a strong flipper presence there, high risk of foreclosures.
    Last year my neighbor foreclosed. the only way it affected me is that my block shared cutting the grass/shoveling the snow etc until it sold, and of course it affected comps.
    but foreclosures in a cooperative living arrangement directly affect the other units financially. all the other units have to start paying the HOA. this puts more and more pressure on the remaining owners and causes quite the argument.

  43. I disagree with Fronzi on this one too… the HOA’s are high but I doubt they’re unreasonable. in general the HOAs on the big towers is higher than the midrises as everything is more expensive. smaller condos can use regular window washers, regular maintenance people, etc. The skyrises require completely different types to maintain them given their size.
    it costs more to wash the 65th floor windows than the 5th floor windows… it costs more to do plumbing, more for elevators etc
    I agree with others that ORHs HOA will likely rise even if they cut the fat. (Perhaps they should look into sacking the Valet parking and the concierge but I doubt that would make much of a dent.)
    maybe they could get it down to $550-600? but now way 200-300. if you do that you’re gauranteeing a huge special assessment in a few years.

  44. ex-SF-er Exactly, thanks for saving me the post; running out of steem trying to make a point and not doing a very good job of it today I admit.

  45. @ Trip: I like having hard data, so thanks for posting these condo stats. Assuming they are correct, I put them into a spreadsheet to see what the real year over year decreases were. While many districts show huge decreases, there are others where prices are flat or even up some. If you adjust for mix (i.e. – hold mix by district flat to last year), prices are actually only down 7% — that’s not a crash in my book. That has been something that I’ve said for a while on this site…mix can deflate prices as easily as it inflates them. Of course, I’ll save that argument for later this month when the Dataquick numbers come out.
    As for 1RH, I think it’s the least appealing of all of the new SoMA developments, and it’s one of the largest; that’s a bad combination. I personally wouldn’t purchase an overpriced condo with mediocre finishes that overlooks the highway. I think many people did however with the hope of flipping for a quick profit. This is obviously going to further inflate inventories and put pressure on prices, but I wouldn’t assume the price drops you are seeing here are indicative of the market as a whole.

  46. Yes, 200-300 is very excessive I admit. I started this issue with an idea about what it would take for regular SF middle class people to jump in. And HOAs are a killer for them.
    Imagine these units go down 200K more. With a 25% down, your mortgage would end up at a more “reasonable” 3500-4000. The HOA would be around 20% of mortgage and climbing. Pricey.
    But I am looking at all of this from a landlord’s standpoint. This building is far from being a good rental investment for individuals. Price point too high, too many amenities that tenants will not accept to fully finance which means the landlord ill finance the lifestyle of their tenants!
    I am sure this is why some failed flips gone failed rental are now being deeply discounted. The numbers would not add up for a rental investment with such high costs unless the prices were much much lower.

  47. I live at the Infinity, having moved from another building in SOMA. Since there’s a gym in the building, I’m saving on the gym fees ($150/month for 2)–which actually makes the Infinity fees LESS than I was paying before (with NO amenities).
    Personally, I’ll pay extra for the better service.

  48. Believe it or not, people are still buying real estate in San Francisco. San Francisco is a great place to live, prices have come down and there are many good deals out there.
    If the stuff that appears on Socketsite is news to you, then you are working with the wrong Real Estate Broker.

  49. I don’t get it. I live in a 54 story tower in Chicago, with swimming pool, gym, doormen, security, heated 6 level underground garage, etc. etc. and our HOA is $325 a month for an upper floor 2bd unit. As for “stunning” building lobby, we have a two story marble lobby with indoor waterwall feature including a bridge over part of the water between the parking garage elevators and tower elevators so I just don’t see why 1RH is charging so much for so little. The entry drive for 1RH needs some serious enhancement.

  50. ^ Spoken like a true Real Estate Salesman. NAR would be proud! What was your message to the buyers you represented at ORH two years ago?

  51. “Where is Recent ORH purchaser when you need him/her?”
    Didn’t you hear, 1RH has trimmed back their sales force ? (yes, that’s a veiled attempt to flush Recent ORH Buyer out 🙂
    Paul – Do RE brokers actually offer their clients bubble analysis ? No analysis that I ever received from an agent ever went beyond what was happening at the moment. That of course was valuable insight but not of the predictive nature that often occurs here on SS.

  52. I love how people on Socketsite think there’s like one guy on Green Street setting real estate prices in SF. 😉

  53. I understand why RE brokers wouldn’t give any predictions.
    1 – No one really knows what will happen, then why confuse the customer with too much speculative info.
    2 – Nobody wants to be the next Lawrence Young and have his own predictions proven wrong quarter after quarter after quarter.
    3 – If you start talking fundamentals like rent equivalent, long term trends and so on, this will freeze even more buyers out. Why buy today if you can deduct a drop from the charts. A 15% drop in value is the equivalent of 10 years of a fully amortized mortgage payments at 6.5%. Ouch.

  54. @ Paul,
    Come on, man! I appreciate that there is always some opportunity in down markets (although SF is just beginning to feel the pain, well behind the rest of the country). But you’re not giving your clients all of the information that is discussed here. You’re “#1 at the Infinity and ORH”, right?
    I certainly don’t mean to suggest that you don’t have the right to make a living, but I wish we could stop pretending that real estate agents are anything other than salespeople, on both sides of the transaction. As long as making a deal for the highest price possible is in the best interests of your client, then you’re an agent. The rest of the time, you’re just a salesman.

  55. I agree w/Paul that buyers must all be aware of the current environment.
    1 year ago, you could pull the latest chart and show how subprime was collapsing and SF was not. The “it’s different here” defense. And it IS different here, to be correct. Just not THAT different.
    Today all districts are hurting in diverse ways. This one line of defense is gone and prospective buyers can not assume anymore that they’ll be automatically safe just because they’re buying in a certain part of SF or in a special building. It’s definitely a tougher sell.

  56. You can not compare the Infinity, Watermark, One Rincon or others to the Brannan. The Brannan is high quality (marble, granite, etc) construction. The Infinity and one Rincon are like particle board and plaster. The Brannan has true concierge, not glorified “security guards” like they have at the Watermark. The Brannan has been around for a decade – it is a community of full timeers, not a building of disgruntled flippers and renters.

  57. There is a certain Darwinism to business and real estate is a very efficient market:
    If you give bad advice, look out for yourself, or just plain suck, you will not be around for very long.
    I’m not the best Salesman, and Skybox Realty is relatively new and just a small outfit compared to the rest of what’s out there in the city. But no one is more plugged into what’s happening at the Infinity and One Rincon Hill than me, Martin Argosino and Victor Khomin. I personally have closed over 30 deals at the Infinity / One Rincon Hill. Martin is not far behind me. We do not work for the developers, and we are lucky to have the opportunity to represent some of the most amazing people in the bay area. Trust me, no one is throwing down a million bucks without doing their homework first. We simply would not allow that to happen.

  58. I agree, denise. I owned a 2/2 at The Brannan (sold 3/06) and thought it was a well run, high quality project. Wouldn’t buy in South Beach now, though. It’s got another 10-20 percent to go, at least.

  59. Oh yeah,
    I attended the One Rincon Hill Holiday Party tonight, and it was absolutely wonderful. It really showed off One Rincon Hill’s pool, courtyard, outdoor fireplace, and activity room.
    The Christmas tree in the lobby glows (I think it’s 20 feet tall.)!
    I am ready for the bah humbugs so bring it!!!!!!

  60. “Paul – Do RE brokers actually offer their clients bubble analysis ? No analysis that I ever received from an agent ever went beyond what was happening at the moment. That of course was valuable insight but not of the predictive nature that often occurs here on SS.”
    No I did not predict Barack Obama would be President.
    No I did not predict the Dow would go from 14,000 to 7,000.
    No I did not predict oil would go from $150 to $43 / barrel.
    No I did not predict Barron Davis would adios the Bay Area for the Clippers.
    And for that reason I have never made 1-3 year predictions for real estate appreciation. If I had that ability I would not be posting on Socketsite. The only thing I do is advise on the quality of the deal relative to what’s happening in the market and in relationship to my clients goals, which may or may not be financially motivated.

  61. “There are a lot of great deals floating around right now if you want to live in South Beach. The buyer is the boss!”
    “Believe it or not, people are still buying real estate in San Francisco. San Francisco is a great place to live, prices have come down and there are many good deals out there. ”
    “If the stuff that appears on Socketsite is news to you, then you are working with the wrong Real Estate Broker.”
    “There is a certain Darwinism to business and real estate is a very efficient market:
    If you give bad advice, look out for yourself, or just plain suck, you will not be around for very long. ”
    “But no one is more plugged into what’s happening at the Infinity and One Rincon Hill than me”
    Paul, instead of just mouthing off platitudes, how about adding some value. Bring some first hand data that can be backed up, present an analysis and defend it. Write a paragraph about what is really going on at ORH and Infinity. (Start by reading this very entry by SS editor and see if you can bring something comparable to the table.) Make an argument backed by some real data why now is the time to buy at ORH/Infinity instead of waiting for a year. Write an article about what’s available for rent at ORH/Infinity and what’s renting or not and why?
    If you insist on placing little ads without adding any value, buy an ad. Have the decency to send the editor a little check 🙂
    The mystery for me is why the editor doesn’t just delete your little free ads without trace even when you’re not adding any value whereas my own witty and value laden comments disappear all the time.

  62. “And for that reason I have never made 1-3 year predictions for real estate appreciation. If I had that ability I would not be posting on Socketsite. The only thing I do is advise on the quality of the deal relative to what’s happening in the market and in relationship to my clients goals, which may or may not be financially motivated.”
    Which is fine. No problem with that whatsoever. But you’re hardly giving them the information posted here if that’s the case. Like I said, you have a function and I don’t think anyone here has a problem with you making a living. But you’re not an agent. You’re a salesman.
    An agent would have concern for the future of the market and would develop tools and methods of analysis that would benefit their clients. They would pass on any potential concerns and hazards that had been identified in the client’s target area. They would not just say, “The buyer is king in the current market!” They would discuss the pitfalls and they would certainly discourage people from jumping in feet first at what appears to be just the beginning of a (likely) precipitous fall in real estate prices.
    I’m not blaming you individually or even real estate agents as a group for how people decide to spend their money. Ultimately, the decision lies with the buyer. But I do question your claim of passing on everything you know to your clients. I do think that some kind of market trend analysis is appropriate from someone who identifies themselves as an “agent”. And I fail to see where most real estate agents add 3% of value to real estate transactions, on the buy side especially. In the internet age people can find properties for themselves and all of the big buildings would be happy to talk to you and show you whatever you want to see, agent or no. 1% is pushing it, frankly.
    I realize I’m attacking your livelihood, but if you don’t call BS during a financial crisis, when do you call it?

  63. Unless you are buying 500 properties in a single swoop, you cannot generalize real estate. You need to examine it case by case; i.e. here are the pluses and here are the minuses, relative to everything else, financially, aesthetically and every other way.
    Some things are copesetic to discuss in a public forum, and some are not. If I know that Google is going to miss their earnings, am I not doing a disservice to my clients if I do not inform them first, before announcing it on a public forum? Really, why would I ever announce it on a public forum? I have to take care of my clients right?
    So, no I am not going to post everything I think about on Socketsite.

  64. In Paul’s defense I don’t think I recall hearing him say that it was a good time to buy at ORH! He only said (to my recollection) that if you wanted to buy there, he had a lot of experience to offer. Kudos to him for braving the mouth of the beast here at SS…
    At some point the RE market’s going to drop enough that I’ll be interested in buying again (based on fundamentals like price to mean income, price to rent ratios). When that time comes, I’ll want to work with somebody who’s familiar with the local market and can help me find the good deals. Whoever it is will probably have been participating in transactions at the top of the market and all the way down too. Will that person have advised his clients not to complete those transactions? Not if he wants to stay employed. But I can appreciate that bias, take it into consideration, and still work with them.

  65. I’ve met paul in person and he’s shown me places..in his defense..I don’t think he tries to lure buyerrs in bad deals. Do i think he is as big of a bear as I am on real estate. no, of course not. Do I think he tries to sucker you in –no.

  66. cooper,
    That sums up pretty much what I think about this situation. Most actors in this market are decent people caught into a situation they do not control. They all tried to go with the flow doing the best they can because this was the proven thing to do to achieve success. You don’t usually succeed by criticizing or questioning everything. Few are very greedy or dishonest but most were caught in this giant Real Estate Ponzi Scheme.
    Of course, if you took a few steps back, you could see the cliff coming very very fast…

  67. what makes some of you think that the information posted here is always accurate and is the Bible of real-estate. There has not been concensus here for a long time. Now that the entire financial system is going to hell, there seems to be more agreement that it’s a bad time to buy. Isnt’ that in itself a platitude?

  68. Sure it’s a platitude.
    2 of my co-workers bought a place last year and earlier this year. I asked each of them how they saw the market. I got the same answer:
    – The market is horrible
    – Their place didn’t lose value at all or even gained!
    It’s a 2-people statistics but one of the 2 overbid everyone by close to 10% in mid-2007 while the other paid full price on his new SOMA Mission Bay condo before the Big One. Hey, what you don’t want to know cannot hurt you, right?
    I think it’s a symptom of our times. The ship is sinking, the lucky ones took all the lifeboats long ago. Those stuck on the ship closed the blinds, went back to their bunk beds trying to sleep it off.

  69. Having an agent/broker’s point of view on this site DEFINITELY adds value.
    . . . and as far as the salesperson vs. agent talk, I think the poster doesn’t understand that there are different types of agency and the real estate agent is not the same type of fiduciary that the poster is implying.
    In fact, it seems as if the poster is implying that the real estate agent is a full-blown investment advisor, and though that’s a facet of his job, that’s not what the principal should be counting on when hiring him.

  70. in the old days before the internet, people needed agents to show them what’s available on the market. after the internet came along, this function started to become less needed. however it coincided with a decade long rise in home prices, so they got away with serving as investment advisers and adding value that way, since everyone is making money left and right wherever they bought. now that that’s finished, it’s much harder to justify that commission.

  71. Paul – No-one expects you to predict when hotpants will come back in style or where al Qaeda will attack next. But when you make a statement like this :
    “If the stuff that appears on Socketsite is news to you, then you are working with the wrong Real Estate Broker.”
    You are implying that a good agent can replace the sorts of analysis that’s often discussed here. No buyer’s agent I’ve ever talked to said anything like “gee, it looks like we’re in an inflated RE bubble. If you can wait it out a few years you can probably get a good deal.” Almost two years ago I suspended my RE search in part because I was seemingly “priced out” of the sort of properties I wanted. I had the suspicion that prices were inflated though that was moot : I could not really afford to buy despite what the mortgage brokers told me.
    Then I found SocketSite where the editors and contributors here have sliced and diced many ways and showed how obviously that the market was overpriced and unsustainable. Observations that should have been obvious to professionals in the field let alone amateur RE observers.
    Yet no agent ever discussed the economic forces affecting RE prices in the city. When I stepped aside in the market my agent respected my opinion but offered no insight at all into whether or not buying at 2006 prices was a good or bad decision.
    Sorry for the longwinded answer, but I just wanted to challenge your suggestion that a good agent replaces the need to independently gather information from sources like SocketSite.

  72. just to point out the obvious, but aside from the fact that agents & brokers will willingly hide any information/trends/analysis that would dissuade someone from buying, they do not, nor are they required to, even understand the economics of these issues.

  73. Obviousely, you guys were working with the wrong agents.
    I’m not saying that the information on Socketsite isn’t worhtwhile, I’m saying just the opposite. It is worhtwhile. What I am saying is that most of it’s old news, and if your Real Estate Broker wasn’t explaining it to you 2 months prior to getting posted on Socketsite, then maybe you are working with the wrong Real Estate Broker.
    And no, I don’t kiss and tell.

  74. “in the old days before the internet, people needed agents to show them what’s available on the market. after the internet came along, this function started to become less needed.”
    Agreed. In London we were able to go into a real estate “cafe” where computers were available free for use with tea and coffee. “Agents” would guide you through financing and paperwork processing for about 1.25% of total cost, but buyers are free whether at home or in the cafe to view ALL properties. After a credit check, keys were presented to empty units that were of interest, or appointments were scheduled with an associate who would allow you into a unit without putting the hard sell on you for whether or not it was the home you wanted. How long must we suffer under the American Real Estate cartel?

  75. Why is this result in any way controversial or surprising?…
    The same axiom that applies to the idiots that have liquidated their stock portfolios should apply here, completely aside from the wholly subjective question of whether these units are desirable or not, and that axiom is…
    “it’s only loss if you sell”….(paper gains and paper losses are equally fictitious) anyone selling real estate now should accept that they’re going to lose money, whether they live in Stockton or San Francisco….
    Let’s resume this discussion in 5-7 years when it will actually relate to more than the current state of the state of the economy…I know, people’s attention spans don’t allow for that kind of pragmatism,but I had to try…

  76. most of it’s old news
    LOL. I respect
    It is not “old news” when most real estate agents were claiming just 3 months ago on SS that RE SF would not suffer that much from the ongoing crisis. Plenty of cash, they can wait it out.
    If people had read the “old news” that you cannot leverage yourself forever at 10X income, maybe we wouldn’t be in this position today.
    But everything has to be translated into plain english:
    – RE speak: This is old news
    – Plain english: Truth. Please stop talking about it, you’re scaring my customers.

  77. “Obviousely, you guys were working with the wrong agents. ”
    Paul, are you saying other agents are incompetent? And are you soliciting buyer’s working with other agents?
    It was my understanding that the cartel prohibits such behavior.

  78. I think what Paul is saying is reasonable: it’s not his role to predict. He can say “the market is currently sinking” which he DID say (“the buyers are in control”-same thing). Ok, so it’s spin, but he’s a salesprperson.
    If people are too stupid to read the tea leaves, it’s not his fault. It’s his job to try to get them the worst deal possible that still causes them to buy the home. That’s the system and he has to work within it.
    None of us has proposed a better system that could be implemented, so I don’t see how we can blame him for working in the system that’s there and maximing his income within that system.
    If people are so stupid as to believe what they are told in such a system, ignoring the motivations involved, well that is their own fault.

  79. I have dealt with a few “agents” over the years and, quite frankly, found my places on my own, they have made money, I live in them, and use the agents for the paperwork. I don’t listen to their advice, just let them do the paperwork. The last two deals, I have used the new places listing agent to sell my old place. Negotiate a lower initial commission and receive more money from their “new” commission. I wouldn’t use the representing agent that has blogging on this topic. Not impressed by this other “top performer” – a dime a dozen.

  80. “the two bedroom condo is now asking $999,900 ($764 per square foot).”
    Ah, how many times were we told that $1000/sqft was the new price point and you either paid it or kept on being a renter with your nose pressed up against the glass.

  81. I agree with Paul Hwang that all real estate is local and that having the right agent can protect you from massive drops in the real estate market. I also believe in Santa, and the Easter bunny.

  82. Denise
    “You can not compare the Infinity, Watermark, One Rincon or others to the Brannan. The Brannan is high quality (marble, granite, etc) construction. The Infinity and one Rincon are like particle board and plaster. The Brannan has true concierge, not glorified “security guards” like they have at the Watermark. The Brannan has been around for a decade – it is a community of full timeers, not a building of disgruntled flippers and renters.”
    I agree with you that the Brannan is a nice complex. I was one of the original residence and lived there for over 7 years, which I think qualifies me to make a comparison. The Brannan is a very good comparison to ORH (and the Infinity too), and there are a lot of similarities. During its first few years, the Brannan was a continuous construction site because the three separate buildings were built in 3 stages taking over three years. Also, it was at least 4 years before the entire complex was sold out. The residence were upset because of construction delays. The fitness center was not open until the 2nd buliding was done and the pool was not constructed until the 3rd building was well underway, about 2 years after the initial move-ins. Also, a significant percentage of the complex was initially purchased by investors, RE agents and as 2nd homes. I would guess at any time 30% of the Brannan was renters.
    The overall quality and amenities at ORH are as good, if not better in many respects. The kitchen appliances are better and the pool deck at ORH is absolutely fantastic…as nice as that at the Brannan. It goes without saying, there is no comparison with the views at ORH. The Brannan’s “Concerige” service has gone through many iterations over the years and, if I am not mistaken, is now actually handled by the security company. At ORH, Charmane Crain is full time concierege dedicated to serving the residence. She has boundless energy and has done an excellent job of building the community and establishing a fun social atmoshpere.
    I think that Infinity is probably a similar situation…which is characteristic of any new residential project during the first few years. These projects take time to evolve and for the residential community to establish itself. I have no doubt that these new projects will evolve into very nice communities to live in, just as the Brannan has done.
    I am extremely pleased with my transition to ORH from the Brannan and feel it has been a nice step up for me and I look forward to living in the Rincon Hill neighborhood.

  83. I left for the weekend, so I’m just now catching up with this thread. This was never meant to be a Paul Hwang bashing session, even though I took issue (and still take issue) with his “you don’t have the right agent” comments and his characterization of everything we discuss here as “old news”. With that said, my issue was-and still is-that the current system sucks, it dupes the young and uneducated and we need to start cutting some of the fat in these deals. The buy side agent’s 3% is an ideal place to start. Even the listing agents should not get this much and they are at least providing the services of a real estate salesperson for their clients-instead of in opposition to them.
    This isn’t a personal thing-I’ve never paid the full %, opting instead to find an agent who will share their commission with me, since they provided little to no value. And I’ve advised everyone who will listen to do the same. Now more than ever, I hope people will carefully look at this and realize that they are paying an exorbitant amount of money to a real estate agent whose interests clearly run counter to their own. And yes, I realize most of the people on here are quite savvy. Nevertheless, it’s amazing what you can take for granted just because things have “always been done that way”.

  84. How did we lose sight of this story?
    2202 is now $999,000.
    1402 (with carpet no less) is still at $1,400,000.
    What insane person thinks 8 floors down is worth $400K more?
    Are we all losing our minds?

  85. What insane person thinks 8 floors down is worth $400K more?
    I don’t know for sure, but I bet it’s the same kind of person who would put down a large down payment in an obvious bubble, and can’t come to terms with the fact that the money is simply gone.

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